What Founders Really Need From Their Lawyer

Introduction

Running a business involves making decisions every day and these decisions often involve legal considerations. However, these are rarely just legal decisions.

A decision can be legally sound while still being commercially unsuitable for your business. Equally, a commercially attractive opportunity may expose your business to legal risks that need to be understood and managed before you proceed.

For business owners, the most valuable legal advice considers both.

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What is the difference between legal and commercial advice?

Legal advice focuses on the legal issues affecting a decision such as your rights and obligations, potential liabilities, regulatory requirements and how your position can be protected.

By contrast, commercial advice considers your broader business context. This can include your objectives, relationships, your business’ financial position, risk appetite, growth plans and the practical consequences of a particular decision.

Neither legal nor commercial considerations should operate in isolation.

For example, a contract may contain strong protection for your business but achieving those protections through extensive negotiations may delay the transaction or damage an important relationship. Alternatively, accepting a commercially attractive contract without understanding the legal risks involved could expose your business to significant liability.

The right approach is to understand both your legal and commercial position before making a decision.

Why legal advice should support your commercial goals

Legal advice should not simply identify what you cannot do.

A commercially focused lawyer should help you understand your options, identify risks and work with you to find a practical way forward.

This may involve explaining:

• what the legal risks are;
• which risks are significant and which are more manageable;
• what protections can be negotiated;
• what the commercial consequences of those protections may be;
• what alternative options are available; and
• what approach best aligns with your business objectives.

Understanding these considerations allows you to make an informed decision.

When legal and commercial considerations intersect

Entering into a major contract

A contract may protect your business but the commercial question is whether the terms are appropriate for the relationship and transaction.

For example, you may want strong termination rights, extensive warranties or strict payment terms. However, insisting on every possible protection may make it more difficult to secure the deal or maintain a valuable relationship.

The role of legal advice is not necessarily to eliminate every risk. Rather it is to help you understand the risks and determine which risks are appropriate for your business to accept.

Taking on a business partner

Bringing in a business partner can lead to new commercial opportunities but it also raises legal questions, such as how the ownership will be divided, who makes decisions and what happens if one owner wants to leave.

A commercially focused legal approach considers not only how the arrangement should be documented but also what is likely to work in practice for the people involved and support the future of the business.

More information about shareholders agreements.

Growing or expanding your business

Growing your business can create new legal risks.

The objective should not simply be to identify every legal issue that could arise from expanding into a new market, entering larger contracts or bringing in investors. It should be to ensure that your legal foundations are capable of supporting the direction in which your business is growing.

Resolving a dispute

When disputes arise, the legal options available may not always be the best commercial options.

You may have a strong legal claim but pursuing it through lengthy and expensive litigation may not make commercial sense.

Understanding the legal position allows you to assess your options. However, understanding your commercial context helps determine which option is right for your business.

The importance of context

Every business is different. The appropriate legal advice for one business may not be appropriate for another, even when they are facing the same legal issues.

A lawyer who understands your business and the context in which it operates can consider factors such as your:

• industry;
• customers and suppliers;
• business structure;
• growth plans;
• existing relationships;
• risk tolerance; and
• long-term objectives.

This context can influence the advice you receive and the solution recommended to you.

What should you expect from your lawyer?

Good legal advice should give you more than a document or a list of legal risks.

You should expect your lawyer to understand what you are trying to achieve and explain how the law affects your ability to achieve it.

This may mean recommending a different approach, suggesting ways to reduce risk, negotiating more appropriate terms or explaining when a particular risk may be commercially acceptable.

Most importantly, commercially focused legal advice does not mean ignoring legal risk but rather understanding that risk in the context of your broader objectives.

Conclusion

As a business owner, you should not have to choose between protecting your business and pursuing commercial opportunities.

The goal is for you to understand your legal position, weigh the risks against the potential benefits and make an informed decision. Legal advice is most valuable when it helps you do this.

At LawBase, we believe legal advice should be practical, commercially focused and tailored to the business behind the legal issue. Understanding your objectives allows us to provide advice that identifies legal risks and helps you navigate them while continuing to move your business forward.

View our fixed fee legal packages designed for SMEs.

Additional resources

Frequently asked questions